The Threshold Effect of Environmental Regulation on Green Technology Innovation Capability: An Empirical Test of Chinese Manufacturing Industries

Zhangsheng Liu, Yuanyuan Gong

Ekoloji, 2018, Issue 106, Pages: 503-516, Article No: e106050


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By constructing panel data on green technology innovation input and output for 28 Chinese manufacturing industries over a 12-year time span from 2003 to 2014, the global slack-based measure directional distance function and the global Malmquist–Luenberger index were used to measure the green technology innovation capability of each industry during the period. The intensity of environmental regulation was used as a threshold when constructing the panel threshold model, to empirically test the non-linear relationship between environmental regulation and the capability for green technological innovation. The results show that: (1) From the perspective of the mechanism of action, environmental regulation has two effects on green technology innovation in two different directions: innovation offset and compliance cost. There is also an asymmetric effect between innovation input and technological progress. (2) As indicated by analysis based on the GML index, there is an inverted U-shaped relationship between environmental regulation and green innovation capability. As the intensity of environmental regulation grows from medium to high, the direction of environmental regulation’s effect on green innovation changes from positive to negative. (3) As shown by index decomposition, the relationship between environmental regulation and the green technology progress index is a significantly inverted N-shaped relationship. (4) Comparative analysis shows that environmental regulation’s promotion of green technology innovation is strongest when regulation intensity is in the medium range. Therefore, improving the green technology innovation capability of Chinese manufacturing would be helped by promoting environmental regulation reform, rationally formulating the regulatory intensity, and optimizing the quality of environmental regulation.


environmental regulation, green technology innovation capability, manufacturing industry, global Malmquist-Luenberger index


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